Break Even Point

The break even point is when the gain equals the loss. The price of a financial instrument at which the option buyer recovers the premium, meaning that he makes neither a loss or gain. In the case of a call option, the break even point is the exercise price plus the premium. This is important for sellers and business owners because they will be able to determine when they will start making a profit, as well as being able to determine the proper price for their products.